Buffett may be big beneficiary of Swiss Re: report
NEW YORK (Reuters) - Warren Buffett's investment in Swiss Reinsurance Co (RUKN.VX) may turn out to be good for the billionaire, but those without such deep pockets may be wary to follow, Barron's financial weekly said.
After taking a 1.2 billion Swiss-franc write-down related to investments in U.S. subprime mortgage, Swiss Re got a shot in the arm with Buffett's Berkshire Hathaway Inc's (BRKa.N) 3.03 stake in exchange for roughly $800 million, Barron's said.
Separately, Berkshire entered into a proportional reinsurance contract with Swiss Re, the world's largest reinsurer by premiums, by taking 20 percent of its property and casualty business over the next five years, Barron's said in its February 4 edition. In Return, Swiss Re reduces its risk.
Swiss Re's long-term benefit of the Berkshire deal may be questionable, Barron's said. For Buffett's help, the Swiss reinsurer surrendered a fifth of a business whose operating profit grew at a compounded annual average rate of 28 percent from 2004 through 2006, the paper said.
Barron's said instead of sharing that revenue with Berkshire, one of Swiss Re's prime rivals, the company may have done better to sell or close its Credit Solutions unit, part of its financial services divisions and the source of its subprime losses.
(Editing by Maureen Bavdek)
